Barnes & Noble's flawed approach to the Nook

Poor sales of the Nook tablet during the last quarter is allegedly causing executives at Barnes & Noble to rethink the company's strategy with regards to digital media. But does the company have what it takes to make the switch into licensing?

Poor sales of the Nook tablet during the last quarter — a period that included the usually buoyant holiday season — is allegedly causing executives at book giant Barnes & Noble to rethink the company's strategy with regards to digital media.

The problem, claims a source speaking to The New York Times, is not so much the losses that the company has suffered as a result of pursuing its hardware platform, but that the lack of traction may cause the company to move away from the idea of designing and building its own tablets and ebook readers, and instead focus on licensing its content to other device makers.

"They are not completely getting out of the hardware business, but they are going to lean a lot more on the comprehensive digital catalogue of content," The New York Times sources is reported to have said.

If the report is correct, this suggests that Barnes & Noble's strategy of wading into the tablet market behind Apple, Amazon, and Google with a "me too" device was a misstep. The company was always going to have a hard time carving out a market when faced with the triple juggernauts of the iPad, Kindle Fire, and Nexus, but it seems that the Nook didn't have what it takes to survive.

There's no doubt that the Nook was a great device from a spec-sheet point of view, but what it lacked — as many commentated at the time of its release — was a real differentiator from Amazon's Kindle Fire and Google's Nexus family of tablets.

"It is a very tough space," said Sterne Agee analyst Shaw Wu. "It is highly competitive, and extras like the depth of apps are very important. But it requires funding and a lot of attention, and Barnes & Noble is competing against companies like Apple and Google, which literally have unlimited resources."

So it seems that Barnes & Noble tripped over its shoelaces with its hardware approach, but will its new digital approach fare any better? Here are just a few questions that spring to mind:

Will Barnes & Noble continue to make tablets and ebook readers?

How much of a gap will Nook's exit from the tablet market leave? What will be the competition's response to smelling blood in the water be?

If Barnes & Noble wants to get into the licensing content game, does it have enough original content to differentiate itself from Amazon?